Timeline: De La Rue's tiff with the Kenyan government explained

Because of the length of time it has been in operation in the country, many people might actually be mistaken to think that the Thika Road-based currency printer - De la Rue - is a local firm.

In reality, however, it’s just a local subsidiary of the conglomerate Thomas De La Rue PLC; a multinational that has been in existence for over 200 years, and with a presence in more than 68% of countries worldwide.

The company’s core business is to print banknotes, passports, and various security documents.

But just how did it begin? How did it find its way to Kenya? And what is the genesis of its longstanding tiff with the Kenyan government that now threatens its operations in the country?

In 1821, Thomas De La Rue set up a printing business in London having left Guernsey earlier. Ten years later, he registered the first patent for color printing and by 1841, he began getting big orders from UK organizations for printing jobs.

In 1898, after a number of innovations, the family partnership structure changed to a private company. In 1921, the De la Rue family left the business and the company became publicly owned.

De La Rue, which has its headquarters in Basingstoke, Hampshire, in the United Kingdom, is listed on the London Stock Exchange.

De La Rue’s entry into Africa and Kenya

In Africa, De La Rue is in business in 33 countries.

What happened was that, in 1991, the firm took advantage of a Kenyan government initiative to promote the country as a center for international trade and strategically invested in a modern facility to print banknotes and other security documents.

Locally, De La Rue has been in business since pre-independence and for the last 25 years, it made Kenya a regional manufacturing hub for its products.

The firm says that it gives back about Ksh.1.25 billion to the Kenya economy as it also directly employs 300 people, with about another 3,000 employed in its supply chain.

Close cooperation with the government of Kenya

On April 18, 2019, De La Rue Kenya publicized its joint venture with the Government of Kenya on its facility in Nairobi, Kenya.

The government acquired a 40 per cent stake in De La Rue Kenya EPZ Limited for Ksh.660 million in a deal that became effective immediately.

Shortly afterwards, on September 4, 2019, the Competition Authority of Kenya (CAK) approved the acquisition of De la Rue Kenya operations by American firm HID Corporation Ltd, which was to take up 100 per cent of the firm’s issued share capital. However, the government-sanctioned takeover remained opaque, at least to the public.

Meanwhile, De La Rue Kenya EPZ Limited was to continue to operate and manage the business on a day-to-day basis as well as appoint three of the five directors of the joint venture’s board.

By 2019, De La Rue PLC found itself in a crisis as a result of uncertainties, deals going sour, and the post-Brexit European Union regulations.

In 2018, De La Rue wrote off £18 million (Ksh.2.37 billion) after Venezuela's Central Bank failed to pay its bills. At around this time, De La Rue PLC was under investigation by the Serious Fraud Office in connection with "suspected corruption" in getting contracts in South Sudan.

In the same year, De La Rue PLC reported a £12.1 million (Ksh.1.59 billion) pre-tax loss for the six months to September 28, compared with a £7.1 million (Ksh.934.64 million) profit reported over the same period the previous year.

Tiff with Kenya Revenue Authority (KRA)

De La Rue’s woes were not over yet; On January 12, 2023, the High Court ordered the firm to pay KRA Ksh.1.1 billion in taxes, after the security printing firm had exhausted an earlier Tax Appeals Tribunal ruling in June 2021 which had ordered it to pay the amount as tax due. The tax demand was after an audit of the firm’s tax between 2013 - 2017.

The Tribunal said that the firm could not offset monies remitted to its parent company De La Rue PLC as an allowable expense under Section 15(1) of the Income Tax Act.

The Tribunal also noted that there was no record of intellectual property rights used within the contract to warrant payment of the royalties.

De La Rue PLC indicated that it was disappointed with the ruling of the High Court, and added that its Kenyan subsidiary was preparing to go to the Appellate court.

On the back of the unfavorable High Court direction, the UK-headquartered currency printing firm on January 21, 2023 suspended its operations in Kenya citing reduced orders and a poor economic climate.

This unexpected turn of events travelled fast among its local stakeholders, with its numerous employees among the most concerned about their jobs as they are set to be laid off.

Its local clients are also looking at uncertain times ahead as De La Rue gets ready to shift its operations out of the country.

The silver lining in the otherwise sad story is the assurance from De La Rue that they will explore fresh business opportunities with a view to restarting local production in the near future “if the economic climate permits,” a jargon commonly associated with ‘non-commitment.’

The money printing firm affirmed that its cooperation with the government of Kenya in the joint venture is not affected.

It is not the first time De La Rue has threatened to stop operations locally; the company once said they would pull out of Kenya if the government went back on its plans to undertake joint ventures with them.

It has not hesitated before to tell the government that if Kenya is not willing to play ball, there were other countries willing to collaborate for long-term investment deals with them.

For a firm whose subsidiaries have been closely connected with the government of Kenya for many years, it begs the question why the government has failed in cultivating an understanding and enabling atmosphere for both local and multinational firms to thrive.

Many jobs, probably over three thousand, are at stake in this situation and the government might lose twofold; from loss of income tax as well as zero corporate tax from the firm itself.

The new administration in Kenya has pronounced itself strongly on the issue of the taxman crippling firms by demanding tax under menaces saying this should stop.

Indeed, a number of businesses that had been crippled by the KRA in the recent past have since resumed operations under more favorable terms with the authority.

It remains to be seen whether the same yardstick will be used in the handling of the money-printing multinational whose operations in Kenya began before it became independent.